tv Nightly Business Report PBS January 31, 2013 6:30pm-7:00pm PST
captioning sponsored by wpbt >> this is n.b.r. >> tom: good evening, i'm tom hudson. uncle sam wants to block a $20 billion beer deal, why regulators think it's a bad idea for the makers of budweiser and corona to merge. >> susie: i'm susie gharib, stocks were red hot in january. wall street pros say that's a green light for the rest of the year, and are predicting double digit gains. >> tom: and the number of female entrepreneurs are on the rise, meet a couple of women who are getting their products in grocery stores. >> susie: that and more tonight on "n.b.r."! >> tom: a beer battle is brewing. the justice department is suing to block the $20 billion merger between anheuser busch-inbev and mexican brewer modelo. using company documents to
bolster their case, justice department lawyers says the deal will lead to higher prices for popular beers like budweiser and corona. anheuser-busch inbev says it is still confident the deal will go through. as darren gersh reports, the fight could be a sign more mergers will face a tougher time in washington. >> reporter: the justice department is not quite ready for a two-pack of brewers to control almost half the american beer market. in a statement announcing a lawsuit to block anheuser-bush inbev's $20 billion deal for mexican brewer modelo, assistant attorney general bill baer says >> if abi fully owned and controlled modelo, a.b.i. would be able to increase beer prices to american consumers. this lawsuit seeks to prevent a.b.i. from eliminating modelo as an important competitive force in the beer industry. anheuser-busch was not deterred, saying: >> we remain confident in our position, and we intend to vigorously contest the justice
department's action in federal court. >> reporter: the proposed merger between the largest and third largest beer makers would create a company with 46% of the market in the united states. millercoors would be a distant third at 29%. antitrust expert barry lynn hopes the suit means the obama administration is finally willing to fight a broader trend towards consolidation across industries. >> the president can really set a tone here, the attorney general can set a tone, the head of the antitrust division can set a tone. and the tone can be we're not going to accept the kind of consolidation we've seen over the last 15, 20 years. >> reporter: but the merger's ecnomoic payoff for anheuser busch is largely about what happens outside the united states. >> they believe there are great efficiencies to be had in mexico and in other markets in the world where corona is underdeveloped. so the primary focus of the deal for their $20 billion is what they can make in mexico and what they can do outside the u.s.
>> reporter: anheuser-busch inbev offered to sell of it's interest in an importing arm to constellation brands and make the company the sole importer of corona beer for ten years. but the justice department says that solution does not go far enough. darren gersh, "n.b.r.," washington. >> susie: on wall street today, stocks finished lower on mixed news about the economy, and worries about tomorrow's important jobs report. jobless claims rose by 38,000, more than expected. consumer spending rose slightly in december, as personal income climbed 2.6%, the highest increase in eight years, on this last trading day of january, the dow lost almost 50 points, the nasdaq was unchanged, and the s&p fell about four points. despite the sell off today, january was a strong month for stocks. the dow surged 6%, its best january since 1994. a 4% gain on the nasdaq, and the s&p jumped 5%. on wall street, they say a big january for stocks usually means a big year as well, it's called
the "january barometer." if stocks follow history, they could be up by 20% or more. will that hold true in 2013? joining us with his thoughts on that, scott wren, senior equity strategist, wells fargo advisors. so scott, are you changing any of your forecasts for this year based on this strong january? >> well, susie, really january has been stronger than what we thought. we've had a 15, 25, year entarget out there for the s&p 500. and we're certainly reassessing that. we want to look at the fundamentals. we want to look at our models. and just see what we think is going to happen. but i do think you said in the intro 20%, i think that's extreme. we've been looking for about a 10% year including dividends. maybe we're a little conservative. but i don't think we're going to see a 20% year in the stock market this year. >> as you reassess things, one of the things that comes up usually you get these stock market rallies when
you have a robust economy. we don't have a robust economy. so does it make sense that we'll get a double-digit rally in this environment? >> you know, based on the work that we're doing right now, no. but saying that, i think stocks can do well in a modest growth, modest inflation environment. we've been in that type of an environment. i think per's going to be in it at least through 2013. so stocks can do okay. especially stocks i think that have a lot of international exposure which the s&p 500, about 50% of those revenues come from overseas. so that's where the growth is we're going to continue to see the growth there. so i think the stock market can do okay, so to expect a 20% year in this slow-growth environment i don't think it's going to happen right now. >> i would like to ask you a little bit about a gloomy assessment that came out from bill gross, the bond guru from pimco. his february letter, he is saying he's to the buying into the bull market, telling investors that stocks pose too much of a
risk for too little return. he says buy something you can sink your teeth in, commodities like gold. he also recommends to go out the u.s. and buy global stocks and currencies from countries like the ones he mentioned, australia, brazil, mexico and canada. what do you think of that bill growth assessment? >> well, you know n my opinion, and really for our clients here as wells fargo advisors, i mean i still firmly believe that one of the best way force people to build wealth over time, build wealth for retirement is building to be by owning equities. i certainly think they need to own a good chunk of u.s. equities. now saying that, the growth, we have hundreds of millions of people around the world that are coming into the middle class. their wages are rise. they want cars, washing machine, all the things we take for granted that is where the growth is going to be. we're in a mature economy. our population is only growing 1%. japan's declining, a lot of western europe is declining. so i agree that you need to invest internationally to take advantage of that
growth. but i disagree that you cannot find some favorable returns in the u.s. i think our companies here especially those in the s&p 500 know how to make money overseas. they have been doing it they are going to continue to do it an at 50% of revenues that come from overseas that number is only going to get bigger in coming years. >> okay. scott, we're going have to leave it there. thank you so much for coming on the program. scott wren, equity strategist at wells fargo advisors. >> tom: still ahead, the first few weeks of january 2013 have been explosive. there's no other adjective other than explosive. the building confidence leading one small business to create new jobs. >> susie: an intense day on capitol hill for defense secretary nominee chuck hagel. the former republican senator from nebraska took a grilling at his confirmation hearing. lawmakers from both sides of the aisle questioned him about his controversial views on gay rights, sanctions for iran, and former president george w. bush's policies in iraq.
but in spite of the turmoil, hagel is expected to get confirmed by a narrow margin. >> tom: an update on failed futures brokerage firm peregrine financial, its founder, russell wassendorf senior was sentenced to 50 years behind bars. he' received the maximum sentence after admitting to engaging in fraudulent activity and misleading regulators for almost two decades. wassendorf also was ordered to pay $215 million, the amount prosecutors say he cost clients. the 64-year-old said he is "very sorry."
>> tom: a couple of media giants today highlighted the challenges of an industry under-going great changes. business at viacom slowed down at the end of last year. advertising at the company's cable t.v. networks like nickelodeon, and mtv fell for the third quarter in a row. and it expects ad sales to be flat this quarter. a bright spot was subscription fees, what cable operators pay viacom to carry channels like nickelodeon and mtv, allowing viacom to report better than expected profits. one of those cable companies, time warner cable saw its expenses go up in the fourth quarter. while it lost 129,000 cable t.v. subscribers, something the company called "disappointing." still, earnings were stronger than anticipated thanks to broadband internet customers. porter bibb is the managing parter at media-tech capital partners. porter a lot going on in this industry. what do these two companies tell you about what is happening first of all with media content like the vie comes of the world? >> well, viacom really has a
lock on content, and the big loss that you referred to that they suffered in the fourth quarter was a breakdown in nickelodeon versus the disney channel. they also don't have jersey shore any more but today they announced that they are setting up cc studios, a production unit to create new content like catfish, the on-line dataing show that they hope will be another jersey shore. content remains the king and as time warner found out they report time warner cable had to report depressed revenues and depressed profits because of some purchases and content namely sports that they made. they bought the rights to the la lakers and la dodgers for an aggregate of something close to $10 billion over the next five years. >> tom: you got those distributors having to pay some hefty dollars for the content to be able to put it through those pipes be it either internet, broadband
or cable watch. are the cable companies doing right when it comes to distribution, are they doing anything wrong? >> well, they have been particularly time warner cable but comcast and the other major cable msoes are committed to what they call ott, over the top television, getting out to multiple screens. the problem that they have is that they're battling amazon and google and sony and apple all of whom have different solutions that don't involve cable or the cable subscription fees to offer over the top television on any kind of screen, whether it's a smart phone, a tablet or whatever. >> and you're going to see a lot of frowns on the cable industry executives later this year when apple comes out with a user-friendly device that will be the replacement for the set-top box and the remote control. >> a lot of frowns on those
shareholders of those cable stocks as well. speaking of competition, you mentioned netflix, we have to mention netflix, big disrupter not only the distribution side which it has been for years but also on content, new series house of cards all 13 yep soweds out on-line, is this a significant building risk? >> well, it certainly makes netflix look itself like a house of cards. because reid hastings is betting $100 million on this greek-- new content that he's creating. and this is just the first of many series that he's hoping will attract-- attract new subscribers. the real issue though with netflix is the costs that they are paying for this content. and it's higher than any network or cable company has to pay. investing $100 million in house of cards the series, you can buy, after friday when they premier the series tomorrow, you can buy the
whole series, all 13 episodes for one month, 7.99 and then drop out of netflix so i'm not sure that strategy going to work. >> we'll have to find out if that return on investments is there for its shareholders, porter bibb with mediatech capital parter? s. >> susie: one theme this earnings season: the impact of currencies on american corporate profits, especially for companies doing business in japan, where the u.s. dollar soared 11% against the japanese yen. that meant less business for many u.s. firms doing business
there. it also meant less money after translating japanese earnings into dollars. erika miller reports. >> reporter: japan is a key market for luxury goods maker coach. but when the dollar rose sharply against the yen in the fourth quarter, the company's merchandise became less affordable for japanese consumers. to put it more bluntly: japanese sales-- in dollars-- plunged 7% in the period. coach is just one of many companies that took a currency hit from the weak yen in the fourth quarter. mcdonald's, harley davidson, columbia sportswear, and aflac were also affected. so why did the yen fall so precipitously? >> that happened because the new government there under premier abe, came in there and said we need to very quickly depreciate our currency to become more competitive globally. >> reporter: he estimates s&p 500 firms could lose more than $22.4 billion in the fourth quarter, due to currency impact. yes, currency exchange rates are beyond any company's control.
but there are strategies firms can use to minimize that exposure. >> when they understand their exposure, they could do operationally things differently. they could, for example, change contract denominations. i don't want to get paid in yen anymore, i want to get paid in dollars. >> reporter: firms can also move money from japanese bank accounts holding yen, to u.s. banks holding dollars. the last resort is hedging-- which is buying a derivatives contract to directly manage currency risk. koester advises investors to avoid investing in companies that do not adequately manage their currency exposure. so how can you tell if the company you invest in does that? >> that's where it's hard. it's difficult-- first-- to figure out what the currency translation charge was, and it's also difficult to realize where the earnings or sales are coming from. because companies technically don't have to break it down by region. >> reporter: to be clear: no one is saying avoid all companies with significant exposure to japan. yahoo, google, pfizer and merck
all do big business there, but koester says they're all doing a good job of managing their yen risk. there are still two months left in the first quarter, so it's hard to know how companies will be affected by currency fluctuations. to make things more confusing, many large multinationals do business in over a hundred countries. erika miller, "n.b.r.," new york. >> tom: let's get going with tonight's "market focus." >> tom: the major stock indices limped into the closing bell, finishing out a very strong january. the s&p 500 spent most of the day in the red, un-inspired by the increase in personal incomes and savings. it was another narrow trading range of just seven points, with the index finishing down by 0.3%. trading volume picked up to end the month. 932 million shares traded on the big board. 2.2 billion moved on the nasdaq. the materials sector was the weakest, falling 0.9%. the energy and consumer discretionary sectors dropped 0.5% each.
dow chemical was in focus among material stocks. it wants to save two and a half billion dollars as it wrestles with weak demand out of europe, and a slowdown in revenues across all its divisions except for its ag business. stripping out the restructuring costs and one-tme items, earnings per share were up from last year, but a penny less than estimates. the steepest revenue drop came in dow's performance materials business, producing solvents and polyurethanes. the stock fell 7% on heavy volume. this is its lowest price since late december. while the company is cautious, it said chinese demand is improving, and it sees encouraging trends with its u.s. customers. murphy oil's disappointing outlook hit its stock today, sending shares down from an 11 month high. the stock fell 5.3%. murphy is in the midst of splitting off its oil refining and distribution business in order to concentrate on exploration and production.
as darren reported at the beginning of the broadcast, the u.s. government is moving to block budweiser's buyout of grupo modelo. constellation brands is a third company involved. as part of the deal, constellation wants to buyout grupo modelo's share of a joint venture the two have. shares fell hard, down 17.4%. it's buyout of the joint venture would double its revenues, something at risk now. facebook shares were heavily traded today after last night's earnings results. but after an early sell-off, the stock was able to erase most of today's losses to end down 0.8%. at least four analysts downgraded the stock after the company reported a big jump in expenses, pinching its profit margins. research in motion also saw big volume, as shares sank 5.8%. it was the second session in a row of selling as the company unveiled its delayed blackberry 10, it's newest smartphone device. there was disappointment though the product won't be available in the u.s. until the middle of march. speaking of smart-phones, wireless semiconductor company qualcomm rallied 3.9% after a
strong earnings report, and a better than expected outlook. qualcomm has benefited from demand for fourth generation wireless technology called l.t.e. after initially having trouble meeting demand for chips, it said that's behind it. shipping giant united parcel service failed to deliver in the fourth quarter. while earnings per share were up from last year, they came in six cents per share shy of estimates, and it warned it expects a "below trend," economic recovery this year. despite offering to buy back more stock after its deal to buy a dutch delivery company was stopped by european regulators, shares fell 2.4%. three of the five most actively traded exchange traded products were higher, led by the russell 2000 tracking fund, up 0.7%. and that's tonight's "market focus."
>> susie: here's an interesting statistic: every minute, a business owned by women opens up. and here in the u.s., new female entrepreneurs are expected to help the job recovery. ruben ramirez looks at why women are finding it easier today to start a business. >> reporter: hewlett-packard may have gotten its start in a garage. but here in new york, this new business was born in the kitchen. this is pastry chef jenny mccoy and her business partner diana lovett. >> jenny had her background in the kitchen and wanted to make things accessible to the home cook. i had my background in the non- profit world and really wanted to have a socially responsible supply chain.
>> reporter: cisse makes mixes for products like hot cocoa, cookies and cakes. they use all-natural products and fair-trade cocoa. that's cocoa that comes from farmers who use fair labor practices, and sustainable pricing. it's been a busy year, the two went from concept to prototype in four months and hit store shelves in september, the products are available in whole foods and other grocery chains along the east coast. >> i certainly think that with a line of baking mixes i think that a woman-owned business sort of makes sense to the consumer. >> reporter: women owned businesses are expected to lead the u.s. economic rebound, according to "women lead" author tracey wilen gaugenti. she says crowdfunding is leveling the playing field. >> crowdfunding is really a great opportunity for people to push there idea out there and work with others to get some funds in so it is increasingly very popular. >> reporter: mccoy and lovett used the crowdfunding website kickstarter to raise their first
$20,000 for their first production run. one trend that's helped cisse, more people looking to cut costs and eat at home, it seemed like a perfect time to get their baking mixes on store shelves. cisse's plans to get it its products in move stores this year, and add employees. >> you will see more small and medium-sized businesses being started by women and what i hope is that these women will continue to invigorate other women to start businesses. >> reporter: perhaps spurring more women to turn a passion into a new business venture. ruben ramirez, "n.b.r.," new york. >> susie: tomorrow on "n.b.r." health care reform is one of the biggest issues facing u.s. lawmakers, tomorrow we'll talk with two people who have been on the front lines of rising health care costs, donna shalala, former health and human services secretary, and former senator
tom daschle. also tomorrow, a look at super bowl ads, ahead of the big game this weekend. ever wonder what goes into making the perfect super bowl ad? our partners at harvard business school. say when it comes to making an effective commercial, there's such thing as being "too entertaining." to find out why, visit, nbr.com and look for the "nbr-u" tab. >> tom: the door business could be a window into the job market. as the economy has swung from recession to slow growth, specialty companies attached to the real estate market have seen business opportunities open again. dash door and closer service is one of those. the company has been around for 58 years working on automatic doors. it's clients are commercial builders and building managers. for instance, the company is fixing this pump that came from an automatic door at miami
international airport. it is one of dozens dash door services at the airport, and business is picking up. >> the first few weeks of january 2013 have been explosive. there's no other adjective other than explosive. >> reporter: steve sanko tells us after a couple of years of flat sales, and rising raw material costs like aluminum and copper, he's more confident in his business, seeing more projects to go after. >> if i had two or three more estimators at this time we would be pumping out more goods, and hopefully win those bids. so that's very encouraging from the stand point of a specialty contractor such as ourselves. >> after the real estate bust and surviving those times, dash door, like a lot of companies relying on that market wasn't looking to add to their employee ranks. it didn't fire anybody during the dark days of the real estate bust but it wasn't adding to payroll either. now it sees business opportunities in the months ahead. dash door is looking to hire two employees. they've advertised nationally for these two new positions, generating more than 100 applicants. >> reporter: when i saw the resumes coming in i thought the flow would stop after 10. but they came in a steady flow.
we had people calling us saying where do i stand? i would say we're still receiving resumes. i had to do our due diligence and look at every resume that had came in. >> tom: sanko is trying out one person now before making a permanent decision. he says the job candidates don't seem focused on pay, but what they're really interested in is a stable job. >> tom: and tomorrow we will see how many jobs were created nation wide in january. we'll talk about it with white house economist alan krueger. >> we'll be covering that as well, so have a great evening, everyone. thanks for wachx nightly business report, see you tomorrow night, right here.